8th Pay Commission: Why is GPF continuing for many employees despite NPS? A look back

While retirement savings of Central Government employees are being taken care of by the National Pension System (NPS), many employees continue to be enrolled in the General Provident Fund (GPF).

GPF was introduced with effect from April 1, 1960, to help employees develop the habit of savings for retirement and to provide them with financial help in need.

Since 2004, the retirement needs of government employees have been covered by NPS. However, GPF continues even as there were discussions in the past to modify it by making it voluntary. This is because the 7th Central Pay Commission (CPC) felt that the number of GPF subscribers would decline as time goes by after the introduction of NPS.

4th, 5th and 6th CPCs

According to the 7th CPC report, the 4th and 5th CPCs did not favour making GPF an optional scheme. They argued that the "fund provided relief to employees in times of need and that accretions to the fund also improved the government’s ways and means position."

However, the 6th CPC recommended making GPF voluntary without any minimum amount limit.

The 6th CPC argued that the resource position of the Central Government was comfortable and the revenues were also showing a steady growth. Moreover, it noted that "employees have the option of a variety of market instruments to choose from for investment purposes, and with the proposed increase in monthly subscription under the CGEGIS (70% of which is for saving purposes), the government employees will, in any case, be making a much higher saving."

The Government did not accept the recommendations of the 6th CPC regarding GPF and CEGIS.

7th Pay Commission

The 7th CPC received no demands regarding modifications in GPF.

It recommended a status quo, saying: "4 This Commission is of the view that, with the introduction of NPS w.e.f. 01.01.2004, the number of subscribers under the GPF scheme will decrease as time goes by. Moreover, the scheme has worked well over the past 65 years and has provided pecuniary relief to the subscribers in times of need."

All eyes are now on the 8th Pay Commission to find out its stance on the GPF.